Emarpy Appliances produces all kinds of major appliances. Richard Feehan, the president of Emarpy, is concerned about the production policy for the company’s best-selling refrigerator. The demand for this has been relatively constant at 8,000 units per year. The production capacity for this product is 200 units per day. Each time production begins, it costs the company $120 to move materials into place, reset the assembly line and clean the equipment. The holding cost of a refrigerator is $50 per unit per year. The current total inventory cost for the production plan Emarpy is using is $10,800 (currently the company makes 400 refrigerators each time production is run). Assume there are 250 working days per year. Question 2: Suppose that Feehan finds out that he can purchase the same refrigerator from an external supplier for $200 each, where the order cost is $120 and the holding cost is still $50 per unit per year. If no stockouts are allowed and no discounts offered, what would be the optimal order quantity for Emarpy and what is the total inventory cost?
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Emarpy Appliances produces all kinds of major appliances. Richard Feehan, the president of Emarpy, is concerned about the production policy for the company’s best-selling refrigerator. The demand for this has been relatively constant at 8,000 units per year. The production capacity for this product is 200 units per day. Each time production begins, it costs the company $120 to move materials into place, reset the assembly line and clean the equipment. The holding cost of a refrigerator is $50 per unit per year. The current total inventory cost for the production plan Emarpy is using is $10,800 (currently the company makes 400 refrigerators each time production is run). Assume there are 250 working days per year.
Question 2: Suppose that Feehan finds out that he can purchase the same refrigerator from an external supplier for $200 each, where the order cost is $120 and the holding cost is still $50 per unit per year. If no stockouts are allowed and no discounts offered, what would be the optimal order quantity for Emarpy and what is the total inventory cost? Show all work and illustrate your policy with a diagram.
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